§305.4. Exemptions; raw materials for further processing

            A. Materials for further processing into articles of tangible personal property for sale at retail shall be exempt from sales and use taxes imposed by all taxing authorities when all of the following criteria are met:

            (1)(a) The raw materials become a recognizable and identifiable component of the end product.

            (b) The raw materials are beneficial to the end product.

            (c) The raw materials are material for further processing, and as such, are purchased for the purpose of inclusion into the end product.

            (2)(a) If the materials are further processed into a byproduct for sale, the purchases of materials shall not be deemed to be sales for further processing and shall be taxable. For purposes of this Paragraph, the term "byproduct" shall mean any incidental product that is sold for a sales price less than the cost of the materials.

            (b) In the event a byproduct is sold at retail in this state for which a sales and use tax has been paid by the seller on the cost of the materials, which materials are used partially or fully in the manufacturing of the byproduct, a credit against the tax paid by the seller shall be allowed in an amount equal to the sales tax collected and remitted by the seller on the taxable retail sale of the byproduct.

            B. Natural gas used in the production of iron in the process known as the "direct reduced iron process" is recognized by the legislature to be a material for further processing into an article of tangible personal property for sale at retail.

            C. The secretary of the Department of Revenue may promulgate rules and regulations necessary to implement the provisions of this Section.

            Acts 2021, No. 53, §1, eff. June 4, 2021; Acts 2024, 3rd Ex. Sess., No. 11, §2, eff. Dec. 4, 2024.